An emerging consensus among long-time PLA observers, including within the US intelligence community, is that the Chinese military has successfully achieved a far-reaching qualitative advancement in its war-fighting capabilities since the beginning of this decade. The PLA is quickly becoming an increasingly credible threat against Taiwan and could even begin to pose a challenge to US military preponderance in East Asia in the next decade if the momentum is sustained.The country's leadership has given strong backing to the PLA's transformation and force-regeneration efforts, which has translated into a hefty and sustained increase in military spending over the past few years. The officially published defence budget has risen on average by 15 per cent over the past five years from 121 billion ($15 billion) in 2001 to 220 billion last year...The Pentagon and US intelligence community estimates that these published figures represent between one-third and one half of actual Chinese military expenditures.

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The PLA is engaged in a rapid build up of necessary assets that includes amassing a sizeable short- and medium-range ballistic missile force, cruise missiles and special operations units and strengthening its strategic surveillance, reconnaissance and targeting capabilities. The Taiwanese Defence Ministry in March 2005 reported that the PLA had deployed around 700 ballistic missiles in the vicinity of the Taiwan Strait and was also quickly building an arsenal of at least 200 Hong-Niao cruise missiles within the next yearTo be able to fight high-tech wars, the PLA is shifting its recruitment system from a reliance on poorly educated conscripts, who now serve only two years, to emphasise the development of a professional long-serving cadre of troops. The PLA will reduce its manpower from 2.5 million to 2.3 million soldiers by the end of this year. This comes on top of a reduction of 500,000 troops in the late 1990s.[With the troops that are left] "the PLA has shifted focus towards amphibious operations for a significant part of the ground forces", Dennis Blasko, a former US Army attach in China, points out. This has included the reorganisation of two motorised infantry divisions in the Nanjing and Guangzhou Military Regions into amphibious infantry divisions and the transfer of another infantry division to the navy to form a second marine brigade in the late 1990s.Blasko estimates that around a quarter of all PLA manoeuvre units, which number around 20 divisions or brigades, plus supporting artillery and air-defence units, have participated in training exercises for amphibious operations[Meanwhile] The PLA Navy (PLAN) is rapidly transforming itself from a coastal force into a bluewater naval power with a force modernisation drive that is unprecedented in the post-Cold War era. "The range and number of warships the Chinese navy is acquiring can be compared to the Soviet Union's race to become an ocean-going navy to rival the US in the 1970s," said a China-based foreign naval attach.The US intelligence community has reported that since 2001, the Chinese shipbuilding industry has produced 23 new amphibious assault ships and 13 conventional attack submarines.The current top priority for the PLAN is the replacement of its fleet of outdated Soviet-era conventional and nuclear submarines with five new advanced models of domestically developed and imported Russian vesselsThe long-awaited Type 093 nuclear-powered attack submarine (SSN) is also close to entering into service, with the lead vessel already undergoing sea trials and expected to be accepted by the navy this year. There are reports that three hulls of this new class have already been laid?The Type 094 nuclear-powered ballistic missile submarine, said to be an elongated version of the Type 093 and equipped with JL-2 sea-launched intercontinental ballistic missiles, is reported to have been launched last July and could be operational within the next couple of years. This is well ahead of Pentagon forecasts, which had previously estimated that the Type 094 would not enter service until towards the end of this decade.